Compared with the "development and change" of the whole industry, TN POWER's strategy of "making solid basic lead-acid battery business, strengthening the growth business of lithium battery, and actively arranging emerging industries" may become its biggest long-term advantage. —— China News Weekly
Recently, TN POWER released its annual report for 2021, which shows that it achieved annual operating revenue of 38.716 billion yuan, a year-on-year growth of 10.30%, but the net profit performance is not as expected, the product raw materials sharply increased to become the biggest constraint factor.
Macroscopically, in 2021, global economic inflation will be stronger, commodity prices will rise sharply, manufacturing costs will generally rise, and the profit space of enterprises will be reduced. In the industry, due to the substantial growth of downstream demand, upstream material supply is difficult to meet the demand, resulting in a substantial rise in raw materials, and even irrational rise. However, in such a severe situation, TN POWER's business is still no lack of bright spots and potential. At present, the expansion trend of the new energy industry continues, and local risks have appeared. The stock price of CATL has been declining recently, which should be a manifestation of capital anxiety.
(The stock price of CATL has been declining recently, which should be a manifestation of capital anxiety)
The risk of overcapacity increases, and lithium battery investment needs to be rational
Looking back at the global lithium battery industry in the past year, although the investment enthusiasm has eased, there is still a large influx of funds into this sector, and the risk of overcapacity has emerged.
With the disclosure of the annual report and the forecast of the first quarterly report, the performance of many new energy companies has increased significantly, especially the growth rate of net profit attributable to the parent company in the middle and upper reaches of the lithium battery industry chain has reached the best level in history. The orders in hand of various enterprises are still at a high level, and new large orders have been signed one after another. At the same time, they are actively expanding production capacity to meet market demand. In addition, a large number of companies whose main business is not in the field of new energy have also increased their investment in the field of new energy.
According to the incomplete statistics of the battery network, in the first quarter of 2022, lithium battery companies represented by BYD, SUNWODA, CALB, EVE, etc. have successively announced a number of new investment and construction projects, and the overall investment and construction funds are as high as 2091.03 billion, which shows a significant year-on-year increase. At the capital market level, power battery companies such as LG New Energy, CALB, and SVOLT Energy have recently accelerated their listing process, and plan to raise funds to expand production to meet the growing needs of the industry.
(Summary of China's lithium battery investment and expansion projects in the first quarter of 2022)
The investment and expansion of production in the entire industry is in full swing, but the national level has begun to worry that there may be oversupply in the follow-up industry. At the recent China Electric Vehicle Hundred People Conference Forum, Lin Nian, deputy director of the National Development and Reform Commission, said: "The National Development and Reform Commission will encourage and guide key areas to formulate industrial development plans, develop new energy vehicles based on existing production capacity, and ensure that the project construction is standardized and orderly, OEMs should focus on key layouts, relying on existing production bases for cluster development, and no new production capacity will be deployed until the existing bases reach a reasonable scale."
Looking at the lithium battery market in the past two years, price increases are the key factor restricting the development of the industry. On the upstream cost side, commodity prices remain high. In just one year, the price of lithium carbonate has risen from 54,600 yuan/ton in early 2021 to 516,500 yuan/ton in March 2022. The price of raw materials has caused a substantial increase in the cost of batteries, and the cost pressure of downstream battery manufacturers is very large. The ultra-high prosperity of the global electric vehicle industry and the lack of supply elasticity caused by the clearing of Australian mines and the delay in the production of South American Salt Lake are the objective reasons for the rise in raw material prices, but the intervention of "speculative forces" cannot be ignored. Raw material prices, forcing downstream manufacturers to "pay".
As an example of the previous lithium cycle, due to the explosion and shock of electric vehicles in China, as well as the restriction and expansion of overseas lithium resources + domestic lithium salt factories, lithium prices have risen since 2015, reaching a high price of 175,000 yuan per ton. From 2016 to 2017, it maintained a high and volatile pattern. From 2018 to 2019, with the decline of the new energy policy and the substantial release of lithium mine energy, lithium prices fell all the way to 40,000 yuan/ton. This round of lithium price cycle started in the third quarter of 2020 and is still in the rising stage.
(The relationship between supply and demand dominates the trend of lithium prices: and after 20Q3, the demand for new energy leads to a sharp and rapid rise in lithium prices)
With the soaring price of lithium ore, miners have also begun to expand production. In terms of global ore extraction of lithium, the main visible increments include the increase in production of Talison, the resumption of production of Altura and Wodgina, the commissioning of inniss, and the extraction of lithium from global salt lakes, the main overseas increments Including the expansion of SQM, Livent, Olaroz, etc.
Domestically, many listed companies have increased the mining of lithium ore resources. Jiangte Motor recently announced that the company has 2 mining rights and 5 exploration rights of lithium porcelain stone mines in Yichun area, with a total of more than 100 million tons of lithium ore resources held or controlled, and plans to invest 2 billion yuan with its wholly-owned subsidiary Jiangxi Jiangte Mining Development Co., Ltd. to build a new lithium ore mining and dressing project with an annual output of 3 million tons and an annual output of 20,000 tons of lithium salt to speed up the development of lepidolite ore resources in Yichun. In addition, upstream companies including Ganfeng Lithium, Tianqi Lithium, Salt Lake Co., Ltd., Yongxing Materials, and Yahua Group are also stepping up the development and layout of domestic lithium resources.
(Global Lithium Resource Distribution in 2020)
Li Zhen, chairman of Gotion High-Tech, said that in the next few years, with the rapid advancement of the Yichun lepidolite project, the improvement of lithium extraction capacity from Qinghai brine, the exploitation of spodumene resources in Sichuan, and the advancement of battery recycling technology, the number of imported lithium resources will increase. The demand will be greatly reduced, and there is a risk of excess in the long run. In the short term, the supply of lithium resources is still in short supply, and the price of lithium fluctuates at a high level. However, in the long run, with the expansion of lithium resources, it is expected to alleviate the adverse impact of rising lithium prices. This efficiency increase is beneficial to the profit recovery of battery companies. The biggest risk lies in the technical route. At present, the technology research and development in the field of new energy is competing with each other, and various possible technical routes are being actively explored, such as sodium-ion battery technology, hydrogen fuel cell technology, etc. Once the technology replacement appears or the technology route is switched, who will be responsible for the investment in lithium batteries and lithium mines?
TN POWER shares seek progress while maintaining stability, and the long-term investment value is highlighted
The development orientation of TN POWER shares is to strengthen the lead-acid basic market, strengthen the lithium battery growth market, and expand the development strategy of emerging industries such as energy storage and hydrogen fuel cells.
TN POWER's main business income mainly comes from lead-acid batteries. With the continuous growth of the electric light vehicle industry, the increasing demand for short-distance travel by residents, the increase in the scale of employees in emerging industries such as delivery logistics, and the closer cooperation between upstream and downstream leading enterprises in the industry, the concentration of the superimposed lead-acid battery industry itself continues to increase, and the lead-acid battery market scale will continue to grow. In 2021, Tianneng battery Co., LTD. will realize the sales of lead-acid batteries for electric light vehicles of 32.347 billion yuan, an increase of 11.30% year-on-year. Under severe external conditions, it can still achieve good revenue growth, which is the result of the accumulation of TN POWER's market distribution channels for many years, and it is also a reflection of its leading position in the industry.
From the product point of view, lead-acid batteries are in a dominant position in the fields of electric light vehicles and electric special vehicles, start-stop for automobiles, etc. due to their high safety, high recycling rate, applicable temperature bandwidth and high cost performance. Even in some important fields, such as aerospace, military industry, ships, and submarines, lead-acid batteries are still assembled. The key is that the demand for electric bicycles and electric light vehicles for short-distance travel continues to grow, coupled with a huge stock market of more than 400 million vehicles and a faster battery replacement cycle, it is determined that the lead-acid battery market still has strong vitality. Based on the current advantages of technology, channels and brands, TN POWER's lead-acid battery business will maintain steady growth.
(TN POWER is the core supplier of power batteries for mainstream electric light vehicles in China)
The lithium battery business is the second growth pole that TN POWER is planning. In November 2019, witnessed by the heads of state of China and France, TN POWER signed a cooperation agreement with SAFT, a subsidiary of French Total Energies, and also a Fortune 500 company. The two parties integrate their respective advantages in technology, production, market and other fields to develop, manufacture and sell advanced lithium battery products for the Chinese and global markets. TN POWER accelerated the expansion of lithium battery business with the help of SAFT's technical reserves.
Affected by the sharp rise in the prices of positive and negative materials and electrolytes, the sales revenue of TN POWER's lithium battery business in 2021 will be 997 million yuan, a year-on-year decrease of 2.35%. However, the annual report shows that in 2021, while ensuring the original two-wheeler market, TN POWER will actively deploy energy storage and low-speed electric vehicle business, complete the delivery of low-speed electric vehicles Haiquan, Jinzhi and other power battery products, and also complete Jiangsu Xu Xiexin Energy and France SAFT energy storage orders.
From the perspective of investment layout, Tianneng battery Co., Ltd. is gradually investing in lithium batteries. In 2021, it will invest about 4 billion yuan to build a lithium battery production capacity of 10Gwh. In 2022, it will invest 5.17 billion yuan to build a 15Gwh energy storage and power lithium battery project. It is expected that with the steady release of lithium battery production capacity, the growth of TN POWER's lithium battery business is expected to increase rapidly. In the process of institutional research, the management of TN POWER said that the company's short-term goal is to gain a leading position in the field of electric light vehicle lithium batteries, and its medium and long-term goal is to make great achievements in high-speed lithium batteries and energy storage.
(High-speed growth of TN POWER's energy storage business)
From the perspective of TN POWER's investment pace and scale, its lithium battery layout is still stable and steady, and the strategy of seeking progress while maintaining stability is to avoid the trap of investment overheating, which is exactly where its long-term investment value lies.
TN POWER is expected in the future
With the proposal of national carbon peaking and carbon neutrality goals, energy storage and hydrogen energy have become important supports for achieving the "dual carbon" goal. Since the beginning of this year, the National Development and Reform Commission and the Energy Administration have successively issued the "14th Five-Year Plan for Modern Energy System", "The 14th Five-Year Plan for New Energy Storage Development Implementation Plan", and "Medium and Long-Term Plan for Hydrogen Energy Industry Development (2021-2035)", etc. A number of important documents, the energy storage and hydrogen energy market has become the golden track in the new energy field.
The annual report shows that during the reporting period, Tianneng’s energy storage and backup business achieved sales revenue of 48.8383 million yuan, an increase of 29.66% over the same period last year. In addition, Tianneng is also strengthening its ties with large downstream energy companies. At present, it has established strategic partnerships with Huaneng (Zhejiang) Energy Development Co., Ltd. and Datang Shandong Power Generation Co., Ltd. in the future. Carry out in-depth cooperation and jointly explore innovative business models. On March 26, TN POWER signed a strategic cooperation agreement with State Grid Huzhou Power Supply Company. The two parties will start all-round cooperation in energy-related fields such as energy storage, microgrid, energy services, technology research and development, and power construction.
In 2021, TN POWER will focus on the industrialization of the hydrogen energy business, and sign strategic cooperation agreements with Nanjing Jinlong, Xugong Group, Geely Automobile and other manufacturers, among which cooperation with Nanjing Jinlong The Kaiwo bus and the Yuanyuan bus cooperating with Geely Automobile are listed in the product catalogue of the Ministry of Industry and Information Technology.
(TN POWER hydrogen fuel cell city bus)
With the dual drive of policies and markets, the energy storage and hydrogen energy markets may enter a period of "double take-off". Another thing that deserves more attention is the battery recycling business of TN POWER. At present, TN POWER has continuously increased its investment in this field and has entered the top three positions in the industry echelon.
At present, the dynamic price-earnings ratio of TN POWER is only about 21 times. Compared with some new energy listed companies with annual revenue decline, profit loss and market value reaching tens of billions, TN POWER is in a depression of value, and its golden track business segment has attracted the attention of many investment funds such as Yuexiu Industrial Fund.